To What Extent Does Executive Pay Influence Company Performance?

In: Business and Management

Submitted By supercandice2007
Words 786
Pages 4
According to Business Week and the Bureau of Labor Statistics, the average CEO compensation, including base salary and annual bonus, was $1.2 million in 1989, which was 45 times the blue-collar wage. In just ten years time, the average has significantly rose to $12.4 million, which was 475 times the blue-collar wage. This phenomenon revealed that companies are putting increasing emphasis on the CEO’s pay packages, holding a belief that better company performance could be achieved from a higher pay packages for executives. In other words, the correlation between executive pay and company’s performance has been underlined by many corporate boards in recent years. With the skyrocketed executive pay in society, there has been an avalanche of debates over the strong bonding between executive pay and company’s performance, especially among shareholders of the companies who doubted if it is worthwhile to invest a significant amount of money on the executive pay package. In fact, despite the fact that executives has been justifying their pay packages with such correlation, still, I agree to a small extent that executive pay does influence company performance.
There is no denying that monetary rewards could be translated to motivation for executives to contribute more and to strive for a more lucrative profit for the company. However, there is no guarantee that a higher remuneration for executives would give rise to a more outstanding company performance given that executive pay is not the only key to success for a company. As a matter of fact, there are a wide range of external determinants affecting companies’ performance that cannot be controlled by executives, with opportunities and threats being the most significant one. It would be difficult for a CEO to lead the firm to perform well during economic downturn even he or she is receiving a rewarding remuneration. With…...

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